For oil, that really depends on the temperature you are riding in. The viscosity index of a heavier weight oil will be better in hot weather (i.e. it will be still be thick when it gets hot in the air cooled XT). Here's how the manual for a 1990 XT600E says it:
SAE 20W40 SE/SF if the ambient temperature does not go below 5 degrees Celsius
SAE 10W30 SE/SF if the ambient temperature does not go above 15 degrees Celsius
I use 20W50 full synthetic, I figure thicker oil will lubricate better and give the engine longer life ultimately.
The forks aren't hard to fix, I just pulled mine and replaced the seals. There's a link to a service manual floating around here somewhere here on the HUBB.
You just need some special tools and some patience, the main thing is the tool used to lock the damper rod so you can take out that bottom bolt. I had a friend cut a 27mm hex nut from 3/8" steel plate with a water jet machine, then I welded that onto a long t-handle and it worked like a dream.
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